Huge cuts revealed in Irish budget

The Irish prime minister has called on his country to pull together as a people as he unveiled a raft of budget measures to restore the State’s finances by 2014

Brian Cowen said no one can be sheltered from the plan for national recovery as he unveiled the extent of spending cuts in the new four-year budget.

Social welfare will be cut by 3 billion euro (£2.5 billion), the public sector pay bill will be reduced by 1.2 billion euro (£1 billion) and VAT in Ireland will rise by 2%.

The four-year plan warned that the drastic cuts will negatively impact on the living standards of the people of Ireland. The public sector workforce will be cut by 24,750, bringing levels back to 2005 levels and student fees will increase.

The minimum wage will be cut by one euro to 7.65 euro (£6.48), but corporation tax will remain at 12.5% – despite calls from other European nations for it to rise.

The Irish government predicted that its economy will grow by 2.75% on average between next year and 2014 and it forecast 90,000 new jobs and unemployment easing back to below 10% by 2014.

The National Recovery Plan stated: “The Plan will help dispel uncertainty and reinforce the confidence of consumers, businesses and of the international community. The tax and expenditure measures contained in this Plan will negatively affect the living standards of citizens in the short term.

“But postponing these measures will lead to greater burdens in the future for those who can least bear them, and will jeopardise our prospects of returning to sustainable growth and full employment.”

Mr Cowen said: “It’s to bring certainty for our people. It’s to ensure that they have hope for the future. To let them know that while we have a challenging time ahead, we can and will pull through, as we have in the past.”

The plan is designed to reduce the State’s running costs by 15 billion euro (£12.7 billion) by 2014, with 10 billion euro (£8.4 billion) from spending and the rest from tax.